Recession: Nigeria’s GDP plunges to -2.24%

…..Manufacturing sector shrinks to 2.9 per cent

….Oil production averaged 1.63 million barrels per day

….In non-oil sector, growth largely driven by agriculture

…. Report contrasts CBN’s Dec. end of recession deadline

Nigeria’s economy showed no sign of reprieve as latest reports from the National Bureau of Statistics (NBS) indicate a melting economy with the nation’s Gross Domestic Product (GDP) contracting to -2.24 per cent year-on-year in real terms as at the end of Quarter Three (Q3) 2016.

This is contrary to the initial reports (2Q) from NBS and the Central Bank of Nigeria (CBN), which centred on economic recovery and indicated an end of recession in December this year.

According to the report, the current GDP level is lower by 0.18% points from growth recorded in the preceding quarter and also lower by 5.08% points from growth recorded in the corresponding quarter of 2015.

“Quarter on quarter (unadjusted for seasonality), real GDP increased by 8.99% during the quarter, aggregate GDP stood at N26,558,952.83 million (in nominal terms) at basic prices compared to the third quarter 2015 value of N24,313,636.94 million.

The document showed that Nominal GDP grew by 9.23%, which was higher relative to growth recorded in the third quarter of 2015 by 3.22% points,” the report says. “During the period under review, oil production, according to NNPC, averaged at 1.63 million barrels per day (mbpd), lower from production in second quarter of 2016. Oil production was also lower, relative to the corresponding quarter in 2015 by 0.54million barrels per day when output was recorded at 2.17mbpd, the report further indicated.

“As a result, real growth of the oil sector slowed by -22.01% (year-on-year) in third quarter of 2016. This represents a decline relative to growth recorded in same quarter of 2015 at 1.06%.

Growth declined by 23.07% points and 4.54% points relative to growth in third quarter of 2015 and second quarter of 2016 respectively. Quarter-on-Quarter growth was 8.07%. As a share of the economy, the oil sector contributed 8.19% of total real GDP, down from figures recorded in the corresponding period of 2015 and the preceding quarter of 2016 recorded at 10.27% and 8.26% respectively, NBS said.

The government had said only recently in various fora that the rise in oil production signaled a rigid economic contraction, which has followed the current administration since inception.

While there was a concomitant rise in prices of crude oil in the international market, the correlating rise in production open new scepter of hope for the government that the economy was recovering.

The latest development indicates an increase in militants’ attacks on oil facilities in the Niger Delta forcing down production. In the non-oil sector, growth was largely driven by the activities of agriculture (crop production), Information and Communication and Other Services the report points out.

It added that the non-oil sector grew by 0.03% in real terms in the third quarter of 2016, reversing the last 2 quarters of negative growth recorded in Q1 and Q2, 2016.

This was 0.41% points higher from the second quarter of 2016, yet 3.03% points lower from the corresponding quarter in 2015. In real terms, the non-oil sector contributed 91.81% to the nation’s GDP, higher from shares recorded in the second quarter of 2016 (91.74%) and the third quarter of 2015.

The manufacturing sector received a big hit shrinking by 2.9% in the third quarter. The fall was linked to currency devaluation and unrealistic foreign exchange policy of the CBN. The nebulous FOREX policy from the CBN had far more reaching effect, according to the NBS. “This is partly due to the continued fall in the exchange rate, which makes imported inputs more expensive, thereby increasing business costs,” NBS said in a bleak assessment of the currency policy.

The collapse of the manufacturing sector and its continuous poor performance was “greatly a result of the continued fall in (the) naira to dollar rate, which translates to much higher cost of business operations.”